Category Archives: Real Estate

TATA Housing, a subsidiary of Tata Sons on Wednesday, announced that it would be offering ‘value homes’ at affordable prices under its ‘Shubh Griha’ project. To be housed in Boisar, which is two-anda-half hours by train from Mumbai, the homes would cost between Rs 3.9 lakh to Rs 6.7 lakh, minus the registration fee.

Addressing the media, Brotin Banerjee, managing director and chief executive officer of Tata Housing said Shubh Griha would bring in a topline of Rs 100 crore, though he declined to disclose the cost of the project. In all, 1,200 houses would be on offer under this scheme with another 1,300 that would be costlier. The houses under the Shubh Griha project would have the “ground plus two format.”

The company, taking a leaf out of the Nano book, would start the process by first distributing forms from this Saturday. A person booking the house can do so by paying Rs 10,000 and the list of winners would be decided through a random selection process or lottery. The winners will be required to pay the balance amount on the completion of the project — this will take two years.
Under Shubh Griha, the company would be offering houses in three sizes — 283 sq ft, 360 sq ft and 465 sq ft. Interestingly, a couple of private builders are already selling homes at similar rates in Boisar. Mr Banerjee, however, said that the Tata Housing project would receive a better response as it offers better amenities. He later told ET, “The plan is to later have Shubh Griha projects in Bangalore and Delhi over the next few months. This will depend on factors like how quickly the land is obtained.” Across all its projects, Tata Housing is looking to have a pan India presence in five years. “We plan to enter cities like Nashik and Ludhiana. Today, we have projects in Bangalore, Kolkata, Gurgaon, Pune and Goa,” Mr Banerjee said.

Today, the company has over 15 million square feet, with 80% going towards residential and the balance for retail. “We have doubled our topline in FY09 as compared to FY08 and expect to repeat that in FY10,” he said.

SMALL DELIGHT
Titled Shubh Griha, the project aims at offering ‘value homes’
The houses would have ground plus two format
The group is keen to recreate its Nano magic
Winner to be chosen by lottery or randomly

REAL estate developers have found a new way of perking up the market. Unitech, DLF, HDIL, BPTP and others are offering a 30-40% discount on ongoing projects. Analysts believe that such projects will help stimulate demand and bring in the much-needed liquidity in the industry, which is already dealing with unsold stock in projects that were launched in the past one year.

“The market might not be bouncing back as yet but because of these launches, some movement has begun for sure. This is providing prospective buyers the confidence to purchase,” says Anshuman Magazine, chairman and managing director of real estate consulting firm CB Richard Ellis.

In the last three months, DLF has launched a project each in Hyderabad and Bangalore, totalling close to 4,000 units. DLF executive director Rajeev Talwar said that of these, about 500 units have already been sold in the price range of Rs 1,850-1,890 per sq ft. “These prices are lower than prices in 1998,” he said. DLF is expecting sales to improve in the near future.

“They have realised that they cannot sit on idle land and they need to launch at current market prices,” says Mr Magazine. “The good news is that the response has been fairly good considering the current market conditions,” he adds. Unitech, too, has launched a few projects in the last two months. Unitech’s Uniworld Garden II in Gurgaon’s Sector 47 has been launched at Rs 3,250 per sq ft. “What this launch has done is that it has brought down the ticket size by 40-50% in this area,” Unitech’s corporate planning head R Nagaraju said. Mr Nagaraju said that all the 150 units launched in the first phase in Gurgaon were sold out in 12 days. The company has also launched a project in Dadar, Mumbai.

Indiabulls Real Estate launched Centrum Park at Sector 103, Gurgaon recently at a price of Rs 1,950 per sq ft. This is nearly 40% lower than prices in the area last year. Sobha Developers, which was planning a project in the same area in the Rs 3,500-4,000 range, has deferred its project.

Aashiesh Agarwaal, real estate analyst at Edelweiss Capital, feels that it is important for developers to maintain market presence. “It will help them monetise their land assets that are lying idle at the moment.”

What is reassuring is that a lot of people are back window shopping, says Aditi Vijayakar, executive director, residential, Cushman and Wakefield India. Transactions, though, are still slow and people are taking a lot longer to decide. Buyers are still uncertain about the delivery capabilities of developers, as the market has seen a number of projects going beyond deadline in recent times.

Until recently, residential property could either be used for accommodation or as a source of rental income. From 2007, homeowners got a chance to have their cake and eat it too. The Reverse Mortgage Scheme introduced by the National Housing Bank allowed senior citizens (those over 60 years of age) to monetise their property to meet their expenses. As the name suggests, reverse mortgage is the opposite of a home loan. While a home loan enables income earners buy a house on installments, a reverse mortgage allows home owners earn regular income by promising to transfer their homes to the lender at a future date.

A lender, after valuing the property, will extend the RML either in the form of a lump-sum amount or a monthly payment, depending on the borrower’s choice. For instance, if the house is worth Rs 40 lakh, the borrower can get a lump-sum payment of Rs 24 lakh (assuming a loan to value ratio of 60%). A 15-year monthly installment arrangement will yield Rs 5,530 per month (Source: NHB calculator). The money cannot be used for speculative purposes such as investing in shares, real estate, trading and so on. “The bank has the option to revise the periodic/lump-sum amount every five years after conducting a re-valuation. If the property prices fall, the bank may revise the amount at any time earlier than five years. At every stage of revision, it is to be ensured that the loan-to-value (LTV) ratio does not exceed 90% at maturity,” informs a senior SBI official.

Thanks to its utility as well as investment value, most Indians strive to buy a house during their working years. Before the launch of RML, an individual could encash his/her home equity by mortgaging the property, which meant that chances of ceding ownership were high, with repayment being difficult due to the absence of incremental cash flows. In contrast, with RML, the borrower has to worry about neither repayment nor loss of ownership. The borrowers can continue to live in the house during their lifetime, even after the expiry of the loan tenure. “Periodic payments under RML, though, will cease after the conclusion of the loan tenure and the interest will accrue until repayment. Upon the death of the borrower or when he/she moves out of the house permanently, the loan will be repaid out of the sale proceeds of the mortgaged house,” says the SBI official. In the case of joint borrowers, if one of the borrowers dies, the surviving spouse will continue to get the RML payments and is allowed to stay in the mortgaged house during his/her life-time, subject to other foreclosure clauses. Borrowers also have the option of prepaying the loan without any penalty. “The money received is not taxable in the borrower’s hands. The interest which is charged is accrued to the loan and does not have to be paid off,” informs Aditya Apte, partner at investment advisory firm The Tipping Point. While RML does seem to offer a golden opportunity for the silver-haired population to retain their financial independence even in the evening of their lives, it is yet to gain acceptance. “In India, it is generally accepted that the next generation will inherit the property. Hence, the hesitancy to part with the asset,” explains Mr Kapil Kaul, country head, HelpAge India Foundation. Adds Mr Apte: “A house is an extremely emotional asset created over years and this makes mortgaging it difficult. Besides, the maximum loan amount that one can hope to get under RML is around Rs 1 crore (including interest), which will yield an annuity of nearly Rs 20,000 per month.” The amount seems insufficient – both in terms of meeting regular expenses and the value of the property mortgaged.

In short, while exercising this option may not be recommended in the regular course, it can certainly light up the twilight years when all other alternatives have been exhausted.